Some recipients of the $165m in bonuses paid out by AIG have begun returning the money, the chief executive of the bailed out insurance group revealed today.

In one of the tensest congressional hearings in recent memory, Edward Liddy said he had asked those who had received bonuses larger than $100,000 to return at least 50% of the money. Some had offered to give up the entire payment.

The bonuses ranged from $1,000 to $6.5m. Contracts providing the payments were signed before the government take-over and Liddy said had he been in charge at the time he would not have allowed them.

Liddy, who took AIG's helm following the government intervention in September and earns a token $1 in salary, said the company was legally bound to make the payments, which, he argued, were necessary to retain employees needed to wind down the business unit that has been blamed for causing the company's failure.

He declined to name those who had received payouts because of concern for their safety, saying he and they had received death threats.

"Americans are asking quite simply why pay these people anything at all," he told a congressional committee. "Here's why: I'm trying desperately to prevent an uncontrolled collapse of that business" to "avoid a systemic shock to the economy" and ensure taxpayers recoup their investment.

He acknowledged the public fury over the bonuses, as his company faced fierce criticism from members of Congress eager to find an avenue to restore the bonus payments to US taxpayers, who now in effect own 80% of the company following the $173bn taxpayer bailout of the insurer.

Reflecting AIG's anxiety to repair its public image – and its funds – it revealed tonight that it was considering selling its 66-storey Manhattan headquarters.

The House tomorrow is to take up legislation that would impose a 90% tax on bonuses paid to top executives at AIG and other recipients of taxpayer bailout funds. Democratic congressman Charles Rangel said today the tax would affect employees making more than $250,000 a year.

As Liddy was grilled by the House subcommittee, Barack Obama said he would ask Congress to pass legislation giving the government greater regulatory authority over financial institutions such as AIG.

He also disclosed he had started talks on legislation to create a new regulatory body like the Federal Deposit Insurance Corp, to give the government more authority over financial institutions. Obama insisted he was not trying to quell anger. "I think -people have a right to be angry. I'm angry," he said.

The president also defended treasury secretary Timothy Geithner, who is under intense pressure for having failed to stop the bonus payments. "He is making all the right moves in terms of playing a bad hand," Obama said.

As the row over the AIG bonuses was played out in Congress, a New York state judge ordered Bank of America to disclose information about bonuses given to Merrill Lynch employees just before the bank bought the company.

New York attorney general Andrew Cuomo is investigating whether Bank of Amnerica and Merrill failed to provide proper disclosures to shareholders about the bonuses and argued that the informat-ion needed to be made public because Bank of America has received $45bn in government assistance.

The judge, Bernard Fried, said the compensation figures did not constitute a trade secret. The judge's ruling reverses a temporary order keeping individual bonus information confidential.